Will there be a tax increase?
That’s the question on most people’s minds in Washington, with one week left until the Congressional Supercommittee has to provide its plan to cut $1.2 trillion from the federal deficit over the next ten years.
With respect to that plan, Democrats have not budged from a tax increase to go along with proposed spending cuts in Medicare and other domestic programs to reach the $1.2 trillion goal. Democrats have been pretty firm: no cuts to domestic programs, like Medicare, without tax increases on the wealthy.
Grover Nordquist, the President of the Americans for Tax Reform and the driving force pushing the Republican Party toward opposing any tax increase at any time, is fighting tirelessly against the Supercommittee’s allowance of a tax increase. You may have heard of Grover– he’s the guy who gets Republicans to sign a pledge not to raise taxes. He locks the pledge in a vault, to be used if any of the Republicans votes in favor of a tax increase. In the current congress, 238 Representatives and 41 Senators have signed the pledge (of the 279 Congressmen to sign the pledge, 276 are Republicans). The pledge states as follows:
I, _____________, pledge to the taxpayers of (________ district of the) state of ____________ and to the American people that I will ONE, oppose any and all efforts to increase the marginal income tax rate for individuals and business; and TWO, oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.
The pledge and the signers may be found here:
In Illinois, the following 12 Congressmen signed the pledge: Mark Kirk, Peter Roskam, Joe Walsh, Robert Dold, Adam Kinzinger, Judy Biggert, Randy Hultgren, Tim Johnson, Don Manzullo, Bobby Schilling, Aaron Schock, and John Shimkus.
This pledge made the supercommittee's work difficult. Without a tax increase, it appears any agreement will be impossible. Without an agreement out of the Supercommittee– an agreement that can pass Congress– cuts to defense spending will kick in, which may be the only thing the GOP fears more than tax increases. The Talking Points Memo’s Brian Beutler explained:
The automatic defense cuts scheduled to kick in just over a year from now if the GOP doesn’t break with Nordquist are suddenly a real, unacceptable risk to many Republicans.
That growing tension between different GOP factions — one many conservatives saw coming — was a key part of the Democrats’ design. Now it’s happening pretty much according to plan and Republicans don’t really have a good response. Some want to dismantle the automatic defense cuts — Democrats won’t let them. Others claim that Democrats set this up to fail — a charge Democrats rebut by pointing to a long public record of offering cuts to entitlement programs if the GOP parts ways with Nordquist. Yet more are trying to disguise higher tax revenues in a way that will appease both Nordquist and the Democrats — but that’s an impossible feat of policy gymnastics.
Because of the predicament, GOP leaders are now trying to sell rank and file on a modest tax increase. This week, a scenario was presented to GOP members in which Republicans would agree to $250 billion in new tax revenue over the next ten years by limiting deductions to upper-income households. Democrats would then agree to freeze tax rates at their current levels– so the Bush tax cuts set to expire at the end of next year, would continue.
The other incentive for Republicans to raise taxes under this plan is to prevent the expiration of the Bush tax cuts– which they most likely otherwise will– preventing a $4 trillion tax increase.
But Grover Nordquist and his pledge gets in the way. Tennessee Republican Chuck Fleischmann (a signer of the Nordquist pledge) stated: "I really think in this environment it would be very, very hard to find much support on the Republican side, particularly with the freshman, to raise any taxes."
Democrats may also stand in the way of such a deal. Many Democrats view $250 billion in new revenue as too little compared with the other $1 trillion in cuts that need to be made. Many Democrats want an equal amount of new revenue through increased taxes as cuts made to Medicare, Medicaid and other domestic programs.
Will the Supercommittee reach consensus? Much of that depends on Grover Nordquist’s power in Washington. By next Wednesday, we’ll know if the GOP will follow Nordquist to what could be a very difficult 2012 general election campaign– polls support a balanced approach of tax increases upon the wealthy and cutting expenditures of domestic programs. If they jettison him, Republicans individually set themselves up for a potentially difficult primary contest against other Republicans who signed Nordquist’s pledge.
Nordquist has put Republicans in a tight spot. Even if he wins the battle and the Supercommittee cannot agree on a plan to Congress, Republicans lose two wars: defense spending will be cut significantly and the Bush tax cuts will expire without a congressional vote to extend.
Not only will there have to be a grand bargain between the parties if the Supercommittee does it job and finds $1.2 trillion in deficit reduction, but the Republican Party will also be forced to make a grand bargain. Whether that happens remains to be seen.